FEATURE-Brompton Bicycle shows British manufacturing how to shift up a gear

LONDON Jan 26 Loan refusal letters and
retailers' rejections frame the walls of the Brompton Bicycle
factory, a reminder of the obstacles the firm has overcome to
establish itself as the UK's top bike-maker, selling 45,000 a
year around the world.

Brompton's success lies partly in its cool - the company
cashed in on a trendy 'Made in Britain' tag, and the fact that
its bikes fold up lends the label a geeky chic as well as
popular practicality.

But beneath the image lies a carefully-constructed business
strategy that reveals not only the level of innovation required
for UK manufacturing firms to succeed, but also the number of
bumps in the road many of them still face.

Britain's 1.5 trillion pound ($2.5 trillion) economy is
among the developed world's fastest-growing thanks to a recovery
in consumer spending last year. But its manufacturing sector, a
tenth of gross domestic output, has been hollowed out since its
post-war boom. From the world's number two exporter in 1948, the
UK fell to No. 8 in 2007 before the financial crisis and fierce
competition from countries like China bumped it down further to
11th position in 2012, according to World Trade Organisation
figures.

The crisis in the eurozone, destination for around half of
Britain's exports, has held back growth in recent years. But
home-grown problems such as a lack of innovation on the factory
floor and a shortage of staffing resources are longer-term
factors at the core of the country's manufacturing malaise.

"The problem is you can't get the brains," Brompton's
managing director Will Butler-Adams told Reuters on a quick tour
of his busy factory. "That's the problem for the UK. We have the
capability - we don't have the engineers."

When Butler-Adams joined Brompton in 2002 the firm founded
by inventor Andrew Ritchie was selling just 6,000 bikes a year,
held back by a lack of skilled craftsmen, a disorganised
production line and a reluctance to outsource non-essential and
time-consuming work.

For the forthright engineering graduate - talked into the
job by Brompton chairman Tim Guinness during a coach journey
when they met as strangers - it was clear Brompton's promise
could only be met by tapping overseas markets, restructuring its
factory floor and training more specialised staff.

WHERE ARE THE ENGINEERS?

The difficulties experienced by Brompton in finding the
right staff - filling one design engineer post took three years
and concluded in a protracted visa wrangle to hire a Chinese
national - illustrate how a very basic need has become a major
headache for UK manufacturing firms.

A 2013 survey by the Confederation of British Industry found
that almost 41 percent of firms were forecasting a shortage of
UK workers with requisite science and engineering skills for the
next three years.

The sector suffers an image problem, said Verity O'Keefe,
policy adviser at manufacturers lobby group EEF.

"There's a perception issue. Young people perceive it to be
about blue overalls, working on greasy engines and actually it's
a lot more than that," she said, adding that students are also
rejecting engineering apprenticeships in favour of careers in
higher-paid sectors such as financial services.

The shortage has been exacerbated by a government drive to
cut net migration to below 100,000 per year by 2015 - a tactic
to win votes from an austerity-weary public worried about their
jobs amid high levels of immigration.

This tightening of visa rules - including scrapping a scheme
allowing British-educated foreign students to work in the
country for up to two years without a sponsor - has reduced the
number of non-EU migrants entering Britain by 24 percent over
the 2006-2012 period, government data showed.

While Brompton has solved some visa problems by appealing
directly to the government, it has also worked around the issue
by investing in staff training - building a workforce of
home-grown specialist engineering craftspeople.

"Foreign students are a good thing, but it can't be the only
thing... We need committed British talent, people who are going
to be here for their entire career to support seismic change in
the British economy," Butler-Adams said.

Brompton's search for staff has got less difficult as its
brand has got trendier, attracting fans such as director Guy
Ritchie and actor Hugh Jackman.

"The majority of small engineering businesses are doing
small, clever, innovative things but they are not glamorous, not
in the public eye...They won't have the same advantages that we
have," said Butler-Adams.

1,200 PARTS

Brompton proudly assembles each of its bikes - which start
retailing at about 800 pounds - from 1,200 parts, in its tiny
west London factory.

Today it is a scene of organisation and efficiency where
uniformed staff work alongside machines in areas designed for
optimum production. Tasks include soldering frames and
assembling bike parts, using state-of-the art, bespoke robotics
that are also designed to help guard Brompton's design from
copycats.

It's a tight operation that is a far cry from 2002's
production line when "one could easily sweep up two pounds worth
of kit" in waste, according to Butler-Adams.

"We've been investing heavily in...really producing good,
efficient manufacturing processes," says the 39-year-old, who
rides a Brompton model saved from one of the rejection bins. "We
outsourced the stuff that was non-core, but the stuff that was
core, we lavish love and attention and engineering on."

That investment, he says, is now helping the firm compete
with rivals that have not developed their production processes
but farmed work out to manufacturers in India and China in order
to save money, only to be hit by a rise in staff and production
costs as those countries' economic growth took off.

Brompton, which makes more than 70 percent of its sales from
43 overseas markets, is now looking to win customers from
California-based Dahon and Taiwan-headquartered Tern, which make
their folding bikes in Asia on a mass scale. It is also chasing
export sales in many other new markets.

The British government gives companies help to boost
exports, providing market research and hosting events at
embassies to meet potential partners.

But British lawmakers think it could do more. A recent
report by the Public Accounts Committee found the UK was not
performing as well as Germany, France and Italy, and could miss
its target of doubling the value of exports to an annual 1
trillion pounds by 2020.

However, manufacturers could do more themselves, and
shouldn't underestimate the potential for their product, says
Butler-Adams, who spent four days cycling around Shanghai to
test how bike-friendly the city was before setting up a new
store there. He also plans to fly to Turkey and the UAE this
year to find new distributors.

"If you can just get businesses to take time out and think,
the market's there. People love British brands."

Brompton is a big hit with middle-aged commuters there,
Uezawa says. "There are other folding bikes, but this one has a
nice squarish shape... They fold up the smallest and people
think they're kind of cute."

Back in London, Brompton expects profit to grow 38 percent
to 3.3 million pounds this year. The company is now seeking a
new London site for its rapidly-expanding business and plans to
roll out a Brompton bike hire scheme across Britain similar to
one organised by the Mayor of London for the city's commuters.

It also plans to make the U.S. - where cycling in cities
such as New York, Austin and Portland is growing in popularity -
its biggest market within four years.